Links: SYRIZA, SOTU, etc.

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(1) Greek elections:  We just posted an article by Mike-Frank Epitropoulos on tomorrow’s elections in Greece, and what a SYRIZA election would mean: A Second Demonstration Project for Greece. The title alludes to the article Mike wrote for us back in May 2010, Greece as a Demonstration Project. Back then, the architects of austerity were using Greece as a demonstration project to see how a country’s population reacted to vicious austerity. Today, those same elites are worried about what the election of an anti-austerity, sometimes anti-capitalist party in Europe would demonstrate for people elsewhere in Europe and around the world. Also: check out the interview on RT with left economist Yanis Varoufakis, who will become Greece’s finance minister if SYRIZA wins. A highlight: in Pt. 2 Varoufakis speaks of the “fiscal waterboarding of Greece” (around 20:18 in the video).

(2) State of the Union:  I was so busy finalizing the Jan/Feb issue of D&S (check it out! and read the editorial note here) that I didn’t get a chance to post some links in advance of SOTU and after it. What I meant to post:

  • The Sunlight Foundation created the hilarious State of the Union Machine, which allows you to adjust inputs of presidential blather and rhetoric, from Washington and Lincoln to Bush père and fils to Clinton and Obama, to create your own SOTU (of sorts–it doesn’t really produce grammatically correct sentences, but you can’t have everything!). Sample word-salad generated: “Now do your part. Tonight I ask Congress to move quickly and decisively in confirming Judge Anthony Kennedy to the Moon.”
  • The SOTU machine reminded me of the Oliver Sacks essay, The President’s Speech, from his book The Man Who Mistook His Wife for a Hat, about the reaction of patients in the aphasia ward to a speech by “the old Charmer, the Actor, with his practised rhetoric, his histrionisms, his emotional appeal” (clearly Ronald Reagan, though he is not named explicitly–and how great a word is “histrionisms”?).  The patients, some of whom could apprehend non-verbal cues but not the literal meanings of words, others of whom can only apprehend the literal meanings, were either convulsed in laughter in response to Reagan’s antics or darkly disturbed.
  • More seriously: hat-tip to TM for pointing me to Lambert Strether’s post-SOTU commentary in his Water Cooler from Tuesday.
  • Via the Real News Network, an interview with Kshama Sawant, socialist Seattle city councilor, about SOTU, The Socialist Response to the State of the Union.
  • Sawant is a nice antidote to the email alert I got from the progressive outfit Media Matters for America, about their piece Right-Wing Media Decry Obama’s Economic Policy Proposals As Santa Claus-Style Giveaways And Class Warfare.  I’m sure they did, but what about a critique from the left of Obama’s class warfare on behalf of the wealthy?  As I have pointed out by email to Casey Skeens, their “communications and outreach associate” who sends out their email alerts, Media Matters for America bills itself as a “progressive research and information center dedicated to comprehensively monitoring, analyzing, and correcting conservative misinformation in the U.S. media,” but they seem to only criticize Republican conservatives, never Democratic conservatives. (Casey has never responded–so much for communications and outreach.)

(3) Sue Holmberg on the Van Hollen Plan:  Over at New Deal 2.0 of the Roosevelt Institute, this piece: The Van Hollen Plan Takes on Soaring CEO Pay: A Debate We Need to Have.

(4) What’s Wrong with Mainstream Economics:  Two pieces discussing what’s wrong with mainstream economics, and whether there is anything wrong.

First, from Noah Smith at Bloomberg View, Economic Stars Swing Left, which tries to respond to the activism at the recent economic meetings (ASSA protests) that we reported on (here), claiming that the protesters are off base, because the most publicly visible economists (Krugman, Stiglitz, Piketty, etc.) are leftists.

… if the protesters bothered to look around, they would see that their wish has been coming true for decades. Over the past quarter-century, economics has been shifting from singing the praises of free markets. Instead, it has moved toward a greater focus on inequality, human welfare and the ways that markets break down.

If you can get beyond the condescension, you may find it funny that Smith cites right-wing economist and pundit Tyler Cowen to back up the claim that Paul Krugman is today’s Milton Friedman.

One of the leaders of the protest, Keith Harrington (whom I quoted in my post about the protests) had a great response:

Utter nonsense Noah. This isn’t about economics swinging right or left. It’s about economics opening itself up to pluralism. Everyone you mentioned in this article is a neoclassical economist. Neoclassical economists like Krugman or Piketty may sit to the left of other mainstream economists like Mankiw, Summers or Reinhart, but that does not mean that the profession is becoming less rigid in terms of the schools of thought and methodology that are considered legitimate. Neoclassicism and its fundamentally flawed assumptions still rule the day.

And in terms of the incompatibility between our protest of the narrow mathematical/ objectivist/pseudo-scientific formalism of neoclassical economics and our protest of Carmen Reinhart’s reckless, ideologically-driven arrogance — there really is none. In both cases the common denominator is a hubristic belief in the fundamental inviolability of the mainstream worldview.

Had you bothered to actually reach out to us and attempt to obtain an accurate understanding of our message, you would have realized that we’re not taking a doctrinaire leftist perspective but protesting the extreme narrowness and provincialism of mainstream economics.

Meanwhile, there was a more serious and bigger-league (than Noah Smith) debate on the same kind of topic in the pages of the New York Review of Books, when Arnold Packer and Jeff Madrick responded to Alan Blinder’s somewhat negative review of Madrick’s great book Seven Bad Ideas, and Blinder responds in an exchange called “What’s the Matter with Economics?” An Exchange. According to Packer, “Blinder concludes that except for some right-wingers outside the ‘mainstream’ and politicians’ refusal to accept economists’ recommendations, little is the matter and Seven Bad Ideas constitutes ‘serial exaggeration.'” The debate is again about whether mainstream economists are mostly right-wing, but it ‘s also about how much policy influence economists have. Blinder, whom both Packer and Madrick praise as one of the best of the mainstream economists, seems to say that mainstream economists don’t have enough (or governments wouldn’t have pursued austerity policies), whereas Madrick and Packer (and Harrington and the economists who write for D&S) say mainstream economists have too much influence (or governments wouldn’t have pursued austerity policies). If you believe Carmen Reinhart, who after the protests claimed that she herself is “heterodox” (and Noah Smith supported that claim), then you’d have to disagree with Blinder, since if that whole Reinhart/Rogoff kerfuffle (see here)  showed anything, it was that economists like Reinhart and Rogoff (a) are mainstream and (b) have political influence to support austerity.

(4) Judith Butler on Black Lives Matter:  I want to recommend a great interview with philosopher Judith Butler at the New York Times‘s philosophy blog, The Stone: What’s Wrong With ‘All Lives Matter’? I, along with about 10% of the online commentators, thought that Butler’s analysis was really great. If you have a couple of hours to waste and your blood pressure is too low, read the rest of the comments, which range from outrage about her failing to talk about Mike Brown’s alleged crimes and character, to failing to talk about “black-on-black crime,” to scorn at the obscurity of theory. (Seriously, this interview is very clear as philosophy goes, and if you don’t like theory, why are you reading a philosophy blog? It’d be like reading a math blog and complaining about the formulae.)  Anyhow, I recommend the interview, but not the comments.

(5) Sasha Breger Bush, Gambling on Hunger and Climate Change:  Sasha Breger Bush, who will be contributing to our March/April special issue on food and farms, has a piece in the Transnational Institute’s State of Power 2015, just released to coincide with the World Economic Forum in Davos. Her piece is called Gambling on Hunger and Climate Change.

That’s it for now.

–Chris Sturr

 

The Euro “Recovery” in Real Time (in Case You Missed It)

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If you read the Financial Times on 2 May, you learned that at long last recovery gathered pace among the countries of the eurozone, “the eurozone’s recovery is spreading from the bloc’s core to its periphery”.  This merely confirmed the intrepid prediction a month earlier of a certain Patrick Chovanec of a financial outfit named Silvercrest Asset Management, “The recovery in Europe is real, and will likely continue and strengthen.”

It may be wise to avoid this source for your asset management, because two months later in the same newspaper you discovered that the spread of euro prosperity did not survive into July, “a slowdown in the eurozone’s recovery was confirmed on Thursday [3 July], after the final reading of a poll of purchasing managers hit is lowest level this year”.

The fleeting apparition of recovery brings to mind the occasional reports of earthly visitations of Christian saints, which bring ecstasy to the observer but prove transitory in their broader impact.  Transitory the alleged recovery has been to say the least, as confirmed by both the New York Times (return to recession in France) and the International Business Times (manufacturing slowdown in Germany).

As I demonstrated a month ago, the so-called recovery was not “real”, nor brief and fleeting.  It has yet to occur.  The chart below, up-dated with preliminary statistics for the second quarter of 2014, demonstrates the euro recovery that never was.  Of the four largest economies on the euro zone, the “best performer”, that of Germany, is a merger four percent above its level at the beginning of 2008.

And that only starts the bad news.  The economies of two countries, Italy and Spain, are at a lower level of GDP than at the depth of the Global Crisis of 2008-2009.  For these two countries returning to the lowest point of the worst recession in eighty years would be an improvement.  That might be taken as a working definition of “been down so long it looks like up to me“.

GDP compared to 2008: Largest 4 EU economies (percentage points, 2008 1st quarter = 0)

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Source: www.oecd.org/statistics.

The news for national income is bad and for unemployment even worse.  The chart below shows the percentage point change in unemployment rates, again compared to the first quarter of 2008.  Setting the first quarter of 2008 as zero allows easy visual comparison.  For only one country, Germany, is unemployment lower, 5.1% of the labor force now compared to 7.9 at the beginning of 2008.

Among the others, the unemployment rate is 16 percentage points higher in Spain (at 25% of the labor force), six higher in Italy and three in France.  Only for Spain do we see improvement, if that word applies to a change from 26.3 to 25.1%.

Unemployment rates compared to 2008: Largest 4 EU economies

(percentage points, 2008 1st quarter = 0, numbers in legend rates for 2008Q1)

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Source: www.oecd.org/statistics.

What is going on in the euro zone? Market economies are supposed to grow, driven by the “animal spirits” of capitalists (to use the term coined by John Maynard Keynes).  What is the cause of the stagnation that seems to affect even the Teutonic dynamo?  The answer is quite straight-forward and obvious to all those not blinded by ideology — a lack of demand.

Businesses produce things when their owners think those things can be sold.  They can be sold domestically to other businesses (capital goods), to households (consumer goods), to the public sector (government demand), or to foreign markets (exports).  The austerity policies championed by the German government and enforced on euro zone countries by the European Commission have public expenditure contracting in real terms in most countries.

The chart below tells the public expenditure story.  In constant prices, public expenditure in Germany was six percent higher in 2013 than in 2008, and five percent higher in France.  Both countries grew compared to 2008, albeit by not very much.  In Italy public expenditure was down by 6% and by 5% in Spain.  The economies of both countries contracted compared to 2008.  There is a lesson from those numbers — don’t cut spending in a recession.

Ratio of public expenditure in 2013 compared to 2008,  4 largest euro economies

(constant prices)

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Source: www.oecd.org/statistics.

What of the animal spirits of the private sector?  Bad news again, with private investment lower in all four countries in 2013 compared to 2008.  The falls are 8% for Germany, 10% for France, a debilitating 27% for Italy, and a disastrous 41% in Spain.  As for exports, virtually no change for France and Italy in constant prices (up 2% and down 2%, respectively).  Germany exports increased by 10%, sufficient to compensate for the fall in investment and stimulate a bit of growth.  But in Spain not even a 20% export increase could raise the economy off rock-bottom in face of the declines in private investment and public expenditure.

Ratio of Private Investment in 2013 compared to 2008,  4 largest euro economies

(constant prices)

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Source: www.oecd.org/statistics and www.worldbank.org..

Has recovery come to the largest countries of the eurozone?  No, because austerity has depressed public-sector demand.  The low growth or decline in public expenditure has lowered private-sector growth expectations, keeping investment low.  And except in Germany increases in exports have been less than the contraction in private investment.

Public expenditure down, private investment dismal, and export growth inadequate to keep the total demand for goods and services from falling.  What about households (aka “consumers”)?  No prizes for figuring out what happens to household expenditure when unemployment continues at a high rate and other sources of demand stagnate.

But, isn’t all this austerity, public and private, the necessary price to pay for running up those huge public debts and budget deficits?  That’s a story for another day.  I show in chapter 9 of my new book, Economics of the 1%, austerity and slow growth make both debt and deficits worse.  Which leads to the one-liner of the euro economies — they suffer from policy-induced stagnation, self-inflicted.  Stop the policy sabotage of these economies and growth will return  It really is that simple.

–John Weeks